AVOID THESE STOCKS WHEN THE FED LIFTS RATES
Colgate-Palmolive
The American multinational consumer products company faces escalating pressure from the household products sector. Colgate-Palmolive’s revenues plunge sharply due to a stronger US dollar even though it already reduced costs and increased prices. Should the Fed decide to raise rates, the company will be substantially affected by higher rates and firmer greenback. Also, the toothpaste maker’s Latin America sales declined by 11% in the third quarter of 2015, accounting for more than one quarter of its total sales. Also, the firm was pressed to slashed its full-year earnings outlook when the overall foreign exchange volatility pulled its sales lower by 13% this year.
Frontier Communications
As days pass by, the future of Frontier Communications Corporation becomes gloomier. Its share prices are overvalued and way above fair market value, attributing it to its extremely high price-to-earnings and price/earnings to growth ratios. The company is carrying a hefty debt burden and wants to secure additional loans to fund various projects, including the $10.5 billion purchase of Verizon assets in California, Florida, and Texas. Client loyalty is another problem as its number of subscribers are much lower than its rivals such as AT&T and Verizon.
Hewlett-Packard
Revenues and earnings declining, plus its fundamentals are lagging. But the IT company still managed to surpass the wider market. Although operating margins are awaited to increase considerably over the next two years, the company is slowly forced to get out of the technology market. Take its competitive edge out, and you will see the firm being hit by escalating rates and emerging markets. As of present, Hewlett-Packard’s printer sales declined by almost 20% this year. The company’s year-over-year revenues are projected to slump in 2016.
Johnson & Johnson
For over two years, the pharmaceutical company has underperformed in the S&P 500. And do not expect it to improve any time soon. Today, the firm is struggling to attain economic growth. A surging dollar has impacted half of Johnson & Johnson’s overseas revenue. In the third quarter of 2015, its top line dropped by 7.4%, coming from an operational increase of 0.8% and a negative currency impact of 8.2%.
McDonald’s
McDonald’s is a high dividend stock. However, Americans now prefer healthier food options. This year, its third quarter global sales rose by 4%, including the first increase in US same-store sales in two years. The fast food chain is beginning to depend on emerging markets like China to fuel growth, as US sales is dwindling. But the Chinese economy is degenerating, making this quest quite impossible as of the moment.
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